5 mega-trends that will soon revolutionize the real estate market

The real estate market is on the verge of major transformations that will revolutionize how we do business. Climate change, ecommerce and a demographic explosion are building new horizons in real estate. The next few decades will usher in a new era where technology dominates business and lifestyle, creating a new impetus for stakeholders and investors to stay ahead of the curve if they don’t want to go extinct.

Here are the five biggest trends that will reshape the industry over the coming decades.

Generation geriatric

Over half the world’s population will be over 60-years-old by 2030 according to UN. That 1.4-billion people that will require more specialized facilities and building adaptations to meet the needs of the elderly. In fact, further estimates by the United Nations show that South Africa’s over-60 population will double by 2050.

Developers will be forced to focus on ergonomic design, both in terms of new projects and existing buildings, that meets the needs of this independent generation of retired people. Germany will likely become the poster child for this new phenomenon: by 2009, already 21% of the population was over 65 — a figure which could reach 29% by 2030 and 34% by 2060 — making it an excellent example to follow in terms of innovation and design.

From megacity to gigacity

The global urban population is due to hit 6.3-billion by 2050, which means that two out of three people around the world will be city dwellers, according to the UN. Megacities, defined as ultra-dense urban zones with over 10-million inhabitants, will multiply over the next fifteen years from 28 in 2015 to 41 by 2030. The vast majority of this growth (90%) will take place in Africa and Asia. Furthermore as development intensifies, these agglomerations are expected to be supplanted by “gigacities”, home to over 100-million individuals, first emerging in China.

The sheer extent of population living in these zones will see real estate prices skyrocket as living areas dwindle, a trend that is already particularly pungent in cities like Hong Kong and Tokyo. Apartments in the latter are already 14% smaller than a decade ago according to The Economist.

Johannesburg is one of Africa’s up-and-coming megacities according to the UN, making it an investment-driven imperative to plan ahead for future profits.

Plan for: residential buy-to-let investments, demand for which is definitely going to grow. As central areas become even less affordable, investors should target peripheral suburban markets with upcoming public transport and access projects.

The rise of telecommuting

Remote working in America, the nation that pioneered the Internet, has increased by 37% since 1995, when only 9% of workers had ever experienced the novelty of “telecommuting”. Nowadays, this model is gaining a strong following thanks to its asset-light business model and the positive consequences on company expenses and employee satisfaction. Thanks to new technology like online video-conferencing, email and instant chat, companies are able to develop networks of professionals across a country and across the globe.

Techcast, a Washington think tank, estimates that up to 30% of workers will telecommute in developed countries by 2019, slowly scraping away at demand for offices and profits for building owners.

Plan for: infrastructural needs such as access and reliability of online connections in new residential buildings as well as new working arrangements like desk and room-sharing as well as co-working spaces.

Ecommerce Eldorado

Buying online has transformed the retail industry and will not doubt change real estate too. 22% of South African internet users have already shopped online and another 48% plan to do so in the future, meaning that investors should expect to see similar trends to Europe where e-retail is growing at a rate of 22% per year and could make up 20–25% of the total revenue for the industry by 2025.

This new trend will seriously affect the current brick-and-mortar retail model. Shops selling appliances, clothes, furniture and technology are set to become showcase window displays and the bulk of offline spending will focus on quick access grocery shops, restaurants, cafes and gyms.

Plan for: retail conversions into housing and the intense development of logistics and distribution hubs around major transport axes as e-commerce giants seek to make improvements on the hub-to-door delivery model.

The Future is Green

In light of climate change, global warming and increasingly aggressive weather patterns, architects are brainstorming new energy-efficient building models that reduce emissions and bills. Internationally recognised standards like BREEAM and LEED are becoming more popular in the commercial property arena as a means to substantiate the industry’s dedication to a sustainable future.

In South Africa, bold ventures like the Green Building Council’s annual conference have big ambitions for the country that include the construction of over 10-million square metres of energy-efficient commercial buildings, 10 000 green-certified homes and training 12 000 professionals in this area.

Plan for:green roofs and water collection systems to minimise energy and water bills while contributing to landscaping maintenance at a minimal cost. Underutilized roof space can also be leased to solar farms, thus increasing the profitability of current installations.

Author | George Kachmazov

George Kachmazov is the founder and managing partner of Tranio.com, an online overseas property start-up. He is a respected real estate and investment expert, and regularly contributes to print and online media with insight on real estate trends and advice for first-time investors. More